blog.postmodernvillage.com

To see the CEOs of the Big Three automakers fly into Washington to beg for money for their companies last week wasn’t nearly as disturbing as hearing who complained about it—notably conservatives who, just a few short months ago were arguing that the massive salaries and golden parachutes protecting heads of even the most poorly-run companies was just the free market determining the “value” of their “leadership.” These conservatives even contended that executive pay swelling to 400 times that of the average worker was just the cost of hiring the “best” and “brightest” even when the poor performance of companies from HP to GM proved that they were neither the best nor the most brightly led.

Washington’s refusal to cough up the cash to automakers might have been due to the bad publicity of the heads of Ford, GM, and Chrysler popping in on their corporate jets, not to mention the bad press lawmakers got from the sloppy application of the last bailout, that of saving quickly crashing Wall Street banks. But, of course, it’s not the executives who are being bailed out here: they’re unlikely to see the soup line anytime soon no matter what happens to the companies they run. Rather, the comparison between these two segments of the economy and who will really be helped if they’re bailed out is revealing of some deep class fissures long gaping in American life. After all, given that the failure of the Big Three will damage the lives of one in ten American workers, you’d think we’d all be for it, no matter how ugly it looks that their chairmen couldn’t give up their executive perks even for one day, even for the sake of appearances. The real problem here is that the heads of the Big Three run the wrong kind of company.

The $700 billion bailout of Wall Street happened virtually no questions asked. There was some consternation that not enough was being done for “Main Street” America, but we all agreed that the retirement investments of regular people were so tied up with big investment banks that these banks were “too big to fail,” no matter how dangerously sloppy their investment practices. Even though the dissolution of Ford, GM and Chrysler would no doubt be equally as damaging, it would have a few effects long sought-after by the investment and managerial classes: it would destroy the power of the blue collar worker, demolish a powerful union that he uses to get that power, and push wages down.

Corporate America has complained about the price of actually employing Americans at least since the 1970s, and the outsourcing of the last 30 years has pretty much been a vote of no-confidence in the American worker, even when it has meant a decline in quality, product safety, and, when fuel prices were high, profitability. The important thing to the investor was that fewer “expensive” Americans were being employed by the companies who dumped US workers, and the stock price would get a nice lift therefrom. The bankruptcy and restructuring of the Big Three would be a small price to pay for this class if it meant that the American worker held that much less power overall. There would be an ancillary decline in the power of the United Auto Workers, one of America’s biggest most influential labor unions. Not only has the UAW demand decent wages and benefits for its members, it has long been a thorn in the side of management and investors, who want free reign to pay their workers as little as they can get away with and employ the workers on terms demanded by the stock market, not the car market. One wonders, after decades of union/management battle, how much this is essentially personal, how much they want to destroy unions because they just don’t like them. Notably, the foreign car makers with plants in the US don’t employ union workers.

The effect on wages would be dramatic as well. With overtime, an autoworker in Detroit could make a very good, middle-class living, $60,000 plus. The non-union autoworkers in the South might be lucky to make $15 an hour, livable, and very good compared to the crappy part-time service industry jobs paying minimum wage that they had to take when traditional Southern manufacturing in fabrics and apparel ended in the 1970s and ’80s. Getting rid of one of the last well-paying manufacturing sectors in the United States would drive down wages overall, leaving unskilled workers with few options that pay better than, perhaps, $10 an hour—and few of these full-time. Thus letting the Big Three die would take millions of high-paying salaries off the books of corporate America, replaced with much more profitable low-end and part time ones, with, again, a bounce in medium-term profitability in those companies that survive.

That this might ruin the American economy is also not a major concern for the investor class. They follow the money, not the polity. If GM, Chrysler, and Ford disappear and Toyota and Nissan survive, all the investors have to do is make a call to their brokers to shift some stock around. If the US tanks, there’s always China and India, the internal markets of which are rapidly expanding.

The real reason conservatives wail against “class war” whenever progressives bring up helping the American worker is that fiscally conservative investors and their friends in both major parties have been waging it themselves for decades, and winning. And this policy of economic scorched earth is one they’d rather we didn’t see.

Why no one is calling the Paulson/Bernanke plan to bail out Wall Street a massive power grab by these two men is beyond me, but historians may see it for what it is. They gain power by dealing directly with those holding our nation’s economy hostage, the Wall Street elite we have allowed to take control, instead of giving this power to our elected representatives. This is appeasement of the investor class on a scale not seen since the days of the danegeld. That Congress is fighting back is a good thing in theory, but may be ruinous in practice: we are all subject to the fragile psychology of the investment class and its representatives on the trading floor.

Our nation is prepared to spend nearly a trillion dollars in order, not to shore up the actual balance of credits and debits of our financial system, but to cure the “jitters” of those whose hands are on the money. Almost everyone in Congress agrees this is “necessary.” What this shows us is that bank executives, traders, investors, are “super citizens,” capable of wielding immense power simply by acting on their disordered states of mind. Maybe more accurately, they’re the real citizens of this country, the genuine aristocracy that must be appeased so the king’s men, Paulson and Bernanke, can keep their heads on their shoulders.

I say that it’s not about actual balances between debits and credits, but what would be even more accurate is to say that the balances of debits and credits that are being weeped over are not actual in the common sense of the word; they are a fiction every bit as real, and every bit as revealing, as a character in some broad national drama, mythological numbers whose significance looms as real as Gilgamesh in the mind of a Babylonian. What we have is a crisis of values in both senses: the values of things and how we value things. The value of an object is what those negotiating over it, or potentially negotiating over it, agree that it is. This is true whether or not it’s a stock in a company or a home on the range. Thus when home values are “artificially” inflated and then that value collapses, the event is more a story we tell about ourselves to ourselves than it is anything inherent about the home. The home does not change; our attitude about it does. When that attitude is held by the investment class, we all lose money, since the investors are the ones whose actions infuse money with their magic, fictive power.

None of these observations are particularly new, but stating them broadly would no doubt cause our system to collapse, again, for the very reasons stated above. All cultures need these stories about themselves to define themselves, and without them we turn to the Ghost Shirt Dance and the Boxer rebellion. Cultures survive such identity crises, but rarely without war, chaos, and starvation that are very, very real—a process we still see playing out in post-colonial Africa.

Another illusion muddying the picture and causing the media and even those involved in solving the problem from seeing it clearly is revealed by the fact that nobody called the president on his statement that we practice a system of “democratic capitalism” in his recent speech about our financial crisis. I generally don’t nitpick about such things, but we practice democracy in only very limited ways: we’re a republic, for the most part, in which people choose their representatives. The idea was that this setup avoided the messiness of mob rule that true democracy was prone to, gave legislators time to travel to the capital and stay there during sessions, and allowed the lay citizen to elect someone perhaps more able to do the job of ruling than himself. The representative was meant to be aligned with the interests of the citizen who elected him, and the competing interests of the various representatives in congress were meant to lead to deliberations, negotiations, compromise—in other words, reasonable solutions. That our Congress is rarely able to actually reach those things says more about our failure as an electorate to do the job of an informed citizen than it says about the relative incompetence of the men and women there. But because elections cost a lot to run, those able to afford to hold office are frequently of or aligned with the investor class, and so they see why bills like the Bernanke/Paulson bill must pass, but they also know that the bill is highly unpopular with the wage-slaves back home. An actual compromise must be reached or the peasants—like you and me—may revolt.

Part of the problem we have seeing this clearly is that we also practice capitalism, a system that is in many ways fundamentally opposed to democracy: where democracy thrives on equality and an informed and interested public, capitalism thrives on the inequality of investors and those they invest with and an ignorant and docile consumer. We get confused because capitalism and democracy share a features: both require a certain amount of liberty to succeed. The investor must be free to invest as she sees fit, and the citizen must be free in body and mind in order to make civic decisions without interference. Capitalism must keep information from competitors in order not to reveal its trade secrets and from consumers in order not to reveal that it serves the bottom line and not them. This is part of the reason that free-market theorists’ “rational agent” notions are total crap—or rather a cynical ploy: basic business practices preclude the transparency the consumer needs to act in a rational way when making buying decisions. The pushers of subprime loans in this latest meltdown provide millions of cases-in-point since they basically ran a confidence game on the poor, creditless fools they duped into buying their variable-rate loans. Added to this is the fact that consumers rarely act rationally when making purchasing decisions anyhow; because most products are equally bad due to the excesses of corporate corner-cutting; consumers buy instead based on what they feel about a product or what they think the product says about them. More basically, industrialization thrives on overproduction, and so capitalism has created consumers, a class of people who define themselves by what they buy and the need to collect more of it, needed or not. Thus the president–with a straight face and perhaps genuinely believing it—told us to go out and buy things as our patriotic duty after 9-11-2001. The investment class was already firmly in control.

As legislators and presidents ceded more and more power to the investment class over the past 25 years capitalism was kept healthy but at the detriment of the real-world values (in both senses) of the citizen; the market became more opaque as it became more free, and its concerns became, de faco, the most important concerns the nation has. It has gotten to the point now that, when asked to define “freedom,” or “democracy,” nine out of ten of my students will equate it with consumer choice, the ability to go to Wal-Mart in the middle of the night and choose between fifty different Chinese-built clock radios.

Democracies, certainly, can tolerate a certain amount of capitalism, but capitalism must be seen for what it is: a way of doing certain economic functions, not a way to run a country.

by Special Correspondent TS DeHaviland

So, let me get this straight. US drivers have been driving less. In response, the price of oil hit new record highs. The Saudis have upped production. In response the price of oil hit new record highs. The major oil companies signed agreements to pump Iraqi oil into the global market. In response, the price of oil hit new record highs.

All this and the oil companies, industry analysts, all the mainstream mediacs, still say that the primary reason we’re seeing these prices is “simple supply and demand.” Is there something I’m missing here? How is this not ample evidence that supply and demand have nothing, or little, to do with it, that these prices are almost entirely due to speculation?

If the precious free-market worked the way its adherents say it should, shouldn’t the oil companies have shifted away from the oil pumping business long ago, say starting in 1970 when the largest oil consumer, the US, reached peak production? You don’t see the Fisher company making bodies for horse-drawn carriages anymore; they’ve long since switched to making car bodies for GM. You don’t see IBM making typewriters anymore. Why are oil companies stuck on this single, finite, outdated product? Of course it’s a lot cheaper these days to buy the presidency, and more importantly the vice-presidency, than it is to retool. It’s even better when that presidency comes with its own army, so you can enforce your energy hegemony “for reals.”

Speculation itself is both the highest, most esoteric of the investment arts created by Capitalism and a signal of its dissolution as practical economics. Speculation is investment for its own sake and by means of concept, in the same way that abstract art is no longer practical representation but the conceptualization of the elements of art themselves. The difference is this: if Rothko wants to delve into blocks of color on canvas, no one suffers, nobody loses a job–aside from maybe Rothko. Art, literature, philosophy are about what isn’t there; they absent the world in order to speculate about it within their infinite realms of greater or lesser imaginative abstraction. An economy is about living in a practical sense; it’s how a culture survives within its environment. There is no room for speculation there.